Since the beginning of the pandemic, Americans trying to buy a home have struggled with a bidding war and a limited number of homes for sale.
However, one area of the harsh real estate environment is improving. It’s a luxury segment, listed up and homes are selling fast.
Demand is so high that even luxury homes on the market months before the pandemic began to sell rapidly as owners are willing to spend a fortune on remodeling projects to beautify them. I will. The motivation is the hot market for luxury properties and the urge to make properties more attractive to buyers.
With an unprecedented shortage of available homes, improved sales of larger, higher-end real estate means that a small number of people are raising prices and bringing a limited number of cheaper homes to market. It means to put out.
Lawrence Yun, Chief Economist of the National Association of Realtors, said: “Spillover but small”
For owners who are willing to spend thousands of dollars to “ready to move in” a luxury property, those efforts are often rewarded when the buyer pays the highest amount.
Real estate agent Jojo Romeo and client Edward LeeSubmitted
Last year, Jojo Romeo, a real estate agent in Irvine, California, specializing in luxury real estate, managed 12 such projects for sellers.
Often they were “white elephants”.
“Customers will say,’Oh, the market is very good.’ I want to get the best dollars for my home,” says Romeo. “And I say,’It’s not a turnkey, so you’re not going to do that.’”
In June 2019, Edward Lee decided to sell his 13-year-old five-bedroom home in Irvine, California.
He listed 3,600 square feet of real estate in the gated community of Turtle Ridge for $ 3.49 million, with a pool.
Eight months have passed since then, and Lee hasn’t had an offer yet.
At that time, Romeo contacted me.
“She’s wondering what’s going on with this house,” recalls engineering business consultant Lee, who asked him to renovate.
“We’re dealing with high-end markets where buyers don’t want to fix anything,” he remembers.
Lee agreed. The house has been rented for over 10 years and the carpet and beige walls were dirty.
After spending $ 150,000 to refurbish, Romeo relisted its home in July. In the first week, we received three offers and sold them for $ 3.55 million.
The confluence of trends has revived demand for luxury homes like Lee. Wealthy Americans want more space when they work, learn, and have fun at home. They also have the means to buy, helped by rising savings, historically low mortgage rates, and soaring stock prices.
“House awareness has increased and the wealthy people who spend their time traveling suddenly spend more time at home,” says Diane Hartley, director of the Luxury Home Marketing Institute in Dallas. “And now they want to make their home bigger and better.”
At the beginning of the pandemic, home orders prevented buyers from searching for a home, discouraging sellers from listing properties. But that changed in May 2020, when online socially distant viewing began to gain popularity.
In the months that followed, demand far outstripped supply, with the value of US homes increasing by about $ 2.5 trillion in 2020, according to Zillow’s analysis. This is the largest year since 2005.
“People are looking at real estate in a more special way than before, and that’s a change in taste seen in all areas of the US housing market,” said Yun, an economist at NAR.
According to Redfin, typical luxury homes sold in the first quarter have been on the market for 61 days. This is 38 days less than the same period in 2020. According to Redfin, this is 26 days less for expensive homes, 18 days for mid-priced homes, and 14 days less for affordable homes.
According to the National Association of Realtors, the number of homes sold for more than $ 1 million increased 81% in February. In the Midwest, that number doubled at the same time. In the northeast, sales increased 98%. In the south, it increased by 94%.
Results aren’t limited to expensive renovations like Li.
Chicago real estate agent Patrick Ryan spent $ 3,000 repairing a single-family home around Wicker Park.Although it was a new construction, it did not sell
“We found that they hadn’t flushed the toilet for eight months,” says Ryan. It looked like a foreclosed property. “
He painted the house and had a specialist clean it. After adding a few flowers to the balcony, the list was contracted for $ 1.72 million over four days, or 97% of the August suggested price.
“If you’re trying to sell your car, you’ll go find out more,” says Ryan.
Overall, the supply shortage in the luxury market is less serious than in other price ranges. This is because some luxury homeowners are offering real estate for sale. According to Redfin, the list of new luxury homes increased 15.8% year-on-year in the first quarter, while the list of other price ranges declined.
According to NAR economist Yun, only by building more homes in other price ranges will inventory levels be high enough to help first-time buyers who are still struggling to find a home in the current market. be able to.
Given that supply meets the demands of the luxury market, home sellers can see decorating a home as a way to stand out from the crowd.
Li was happy to spend the extra money on repairing his house, but it was still a dilemma.
“I think it was quick to sell it,” he says with a laugh.
Swapna Venugopal Ramaswamy is USA TODAY’s Housing and Economic Reporter. Follow her on Twitter @SwapnaVenugopal.